The U.S. Supreme Court is backing Minnesota’s effort to clear up some of the life insurance policy beneficiary designation problems that result from divorce.
The court ruled 8-1 today, in Sveen et al. v. Melin, that Minnesota can apply its beneficiary designation fix law to policies that were in force before 2002, when the fix law was enacted, as well as to policies purchased after the law was already in effect.
The 2002 Minnesota law that states that, unless a couple make other arrangements, the dissolution or annulment of a marriage revokes all of the couple’s revocable life insurance beneficiary designations.
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Justice Elena Kagan writes, in an opinion for the majority, that the Minnesota law causes no substantial impairment to the contractual relationship between the policyholder and the insurer.
“The statute is designed to reflect a policyholder’s intent,” Kagan writes.
If an insured wants to keep a life insurance policy beneficiary designation in place after a divorce, “he may do so by the simple act of sending a change-of-beneficiary form to his insurer,” Kagan writes.
But the court’s newest justice, Neil Gorsuch, writes in a dissent that, under the Contracts Clause of the U.S. Constitution, any state law that changes a contractual relationship retroactively is unconstitutional.
Many divorcing spouses may want to revoke the life insurance beneficiary designations they made while they were married, but “I do not see how a statute doesn’t substantially impair contracts just because it reflects ‘many’ people’s preferences,” Gorsuch writes.
The Minnesota law “substantially impairs life insurance contracts by retroactively revising their key term,” Gorsuch writes.
A document that includes both the majority opinion and the dissent is available here.
The man insured by the policy involved in the dispute, Mark Sveen, bought a life insurance policy from Metropolitan Life Insurance Company, a unit of MetLife Inc., in 1997. He married Kaye Melin later in 1997. In 1998, he named her to be his primary beneficiary.
Sveen and Melin divorced in 2007.
Sveen died in 2011, at the age of 46.
Melin said that she and Sveen had agreed that he would continue to make her the beneficiary of the life insurance policy.
Lawyers for Melin, and for Mark Veen’s children from another marriage, never introduced any written documents showing what Mark Veen wanted to do about the beneficiary designation.
Metropolitan Life asked the U.S. District Court for the District of Minnesota for a determination about which parties should get the death benefits.
The district court ruled that the 2002 Minnesota beneficiary designation fix law should apply. The district court told Metropolitan Life to pay the death benefits to Mark Veen’s children.